ICAC finds 41 public officials and suppliers corrupt

﻿﻿﻿Monday 29 October 2012

The Independent Commission Against Corruption (ICAC) has made corrupt conduct findings against 41 people in its report on an Investigation into allegations that staff from a number of local councils and other public authorities accepted secret benefits from suppliers and that staff from two local councils facilitated payment of false invoices from suppliers, released today.

The ICAC found that 22 employees or former employees of 14 local councils and another public authority in NSW engaged in corrupt conduct by accepting gift vouchers and other gifts from suppliers as an inducement to continue placing orders with their companies or as a reward for placing orders with the companies. Fifteen staff from four supplier companies were also found to have engaged in corrupt conduct through their involvement in offering these gifts. The ICAC also found that two former storepeople, Geoffrey Hadley of Bathurst Regional Council and Kerry Smith of Yass Valley Council, and three suppliers engaged in corrupt conduct in relation to false invoices issued to those two councils in return for cash kickbacks. Under this scheme, Mr Hadley and Mr Smith received combined corrupt payments in excess of $323,000.

The report says that the gifts accepted by the public officials far exceeded any reasonable concept of token value, and included holidays, TV sets, camcorders, DVD players, iPads, iPhones, coats and gift vouchers. Despite agencies generally having in place policies and training about the acceptance of gifts, they did not focus on corruption risks in the broader relationship between buyer and supplier and the opportunity for corruption in their procurement and inventory management systems. It was weaknesses in these systems that allowed the provision of gifts and benefits to escalate to the serious corrupt conduct of Mr Hadley and Mr Smith involving false invoices. Evidence before the ICAC suggested this conduct may have cost the two councils involved in those rorts a combined total of over $1.5 million.

From the outset of the ICAC's investigation, it became apparent that the provision of incentives by businesses to public officials in NSW was widespread. Given the sheer scale of the alleged corrupt conduct and the finite resources and time at the ICAC's disposal, the ICAC decided to focus its investigation on the conduct of employees of 15 of the 110 public authorities in NSW whose staff were alleged to have received gifts from suppliers. These 15 public authorities, selected after assessing a number of factors including the value of the gifts received, were Ballina Shire Council, Bathurst Regional Council, Broken Hill City Council, Burwood Council, Byron Shire Council, the Council of the City of Botany Bay, the Council of the City of Sydney, Lithgow City Council, Liverpool City Council, Narrandera Shire Council, Orange City Council, the Roads and Traffic Authority, Walgett Shire Council, Waverley Council and Yass Valley Council.

In relation to gifts offered to public officials in this investigation, the ICAC closely examined the conduct of a number of supplier companies, including Hilindi Pty Ltd (trading as R&R Tape Supplies), Momar Australia Pty Ltd, and NCH Australia Pty Ltd. Many of the salespeople whose conduct was investigated were specifically trained in a selling process called the Gears of Selling, whereby salespeople are trained to ask questions about a buyer's family, hobbies and health, and to pretend to have an interest in these matters that they did not genuinely have. The process usually started with gifts worth modest amounts, increasing with the value of the orders placed by the public officials on behalf of their agencies. Salespeople would usually suggest sending the gifts to the buyer's home rather than to their workplace, in order to conceal the arrangement from the employer.

The ICAC has made 15 corruption recommendations to all councils in NSW, as it is evident that the conduct uncovered during this investigation is systemic and all councils should take action to mitigate these risks. The Commission is of the opinion that the advice of the Director of Public Prosecutions should be obtained with respect to the prosecution of nine people for various offences. The ICAC held a public inquiry as part of the investigation over 14 days, commencing on 4 October 2011. The Hon David Ipp AO QC, Commissioner, presided at the public inquiry, at which 55 witnesses gave evidence. The report is available on the ICAC website at www.icac.nsw.gov.au.